12 June 2007 External T.I. 2007-0223571E5 - Medical - Renovation to Home and Van Modification

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: 1. Whether some or all of an individual's qualifying medical expenses may be allocated to his/her spouse for purposes of the medical expense tax credit. 2. Whether particular payments for the modification of a mini-van are medical expenses for purposes of the medical expense tax credit. 3. Whether particular expenses related to renovations and alterations of a home are medical expenses for purposes of the medical expense tax credit.

Position: 1. Yes. 2. Question of fact but the expenses likely don't qualify. 3. Question of fact but some of the expenses likely don't qualify.

Reasons: 1. The formula in subsection 118.2(1) of the Income Tax Act allows an individual to claim a tax credit for qualifying medical expenses incurred in respect of the individual's spouse. 2. The description of the modifications to the mini-van do not appear to conform to the types of modifications prescribed in section 5700 of the Income Tax Regulations. 3. It appears that some of the renovations to render the home usable would reasonably be incurred by a person who has normal physical development or who does not have a serious and prolonged mobility impairment. It also appears that some of the renovations are of a nature that would increase the value of the dwelling.

								2007-022357
XXXXXXXXXX 							J. Eckler
(416) 952-8930
June 12, 2007

Dear XXXXXXXXXX:

Re: Medical Expenses - Renovation to Dwelling and Modification of Vehicle

We are writing in reply to your letter of January 29, 2007, wherein you asked whether payments for the purchase and modification of your mini-van and for the renovation of your home, would be eligible as medical expenses for purposes of the medical expense tax credit, and whether your qualifying medical expenses may be split between you and your wife.

The situation outlined in your letter appears to relate to a factual one. It is not this Directorate's practice to comment on completed transactions. You should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. A list of TSOs is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.

Our Comments

The CRA's general views regarding medical expense tax credits are contained in Interpretation Bulletin IT-519R2 (Consolidated), Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction. This is available on our Web site at www.cra-arc.gc.ca.

The Income Tax Act ("the Act") allows individuals to claim a medical expense tax credit based on their total qualifying medical expenses. Subsection 118.2(2) of the Act provides the list of expenditures that may qualify for the medical expense tax credit. An expenditure that is on this list may be claimed by an individual provided that the expense is incurred by the individual, the individual's spouse or a dependant of the individual. The formula for calculating the amount of the tax credit for an individual is provided in subsection 118.2(1) and it precludes a claim by any other taxpayer for any taxation year for those particular qualifying medical expenses. This means that either an individual or his or her spouse may claim a tax credit for qualifying medical expenses, but any amount may be claimed by only one taxpayer, and not by both the individual and his or her spouse.

Payments for the purchase and modification of a mini-van may qualify as medical expenses, within defined limits, provided certain conditions are satisfied. Paragraph 118.2(2)(l.7) of the Act provides that a portion of the amount paid for the acquisition of a van, that has been adapted (at the time of its acquisition or within 6 months after that time) for the transportation of a patient that requires the use of a wheelchair, qualifies as a medical expense. The amount that could qualify as a medical expense is the lesser of $5,000 and 20% of the amount paid for the acquisition of the van after deducting any amount included therein, which qualifies as a medical expense pursuant to paragraph 118.2(2)(m) of the Act.

Paragraph 118.2(2)(m) of the Act provides the authority for including various types of devices and equipment as medical expenses for purposes of the medical expense tax credit. To qualify under paragraph 118.2(2)(m) of the Act (and subject to certain prescribed limits), the device or equipment must satisfy the following conditions: It must be (i) of a prescribed kind; (ii) prescribed by a medical practitioner; (iii) not be described in any other paragraph of subsection 118.2(2) of the Act; and (iv) meets such conditions as may be prescribed as to its use or the reason for its acquisition. For the purposes of paragraph 118.2(2)(m) of the Act, section 5700 of the Income Tax Regulations (the "Regulations") lists the devices and equipment that are of a prescribed kind. Paragraph 5700(m) of the Regulations refers to, among other things, power-operated lift equipment designed exclusively for use by or for a disabled individual to assist the individual to gain access to a vehicle or to place the individual's wheelchair in or on a vehicle. Paragraph 5700(n) of the Regulations refers to a device designed exclusively to enable an individual with a mobility impairment to operate a vehicle. Accordingly, power-operated lift equipment and driving devices, such as a steering knob and a right-turn signal adapter, may qualify as medical expenses provided that they are prescribed by a medical practitioner and meet the other conditions noted above.

Therefore, in general terms, the effect of paragraph 118.2(2)(l.7) of the Act is to allow the medical expense tax credit in respect of the amount paid for the acquisition of the van, excluding any amount for a device or equipment described under paragraph 118.2(2)(m) of the Act. However, amounts paid in respect of such devices or equipment qualify for the medical expense tax credit by virtue of paragraph 118.2(2)(m) of the Act.

Your submission does not include a prescription from a medical practitioner. Without such a prescription you would be ineligible for a tax credit pursuant to paragraph 118.2(2)(m) in respect of any power-operated lift equipment. We are therefore unable to confirm that any of the specific amounts listed on the invoice from XXXXXXXXXX would constitute medical expenses for purposes of the medical expense tax credit. This invoice identifies a manual ramp and gate. It is unclear how this modification conforms to the requirement for power-operated lift equipment pursuant to paragraph 5700(m) of the Regulations.

The description of the remaining modifications to your mini-van are unclear. Assuming that you are able to present a prescription from a medical practitioner, we recommend that you submit all relevant facts and documentation related to your mini-van modifications to your local Tax Services Office for their views.

Under paragraph 118.2(2)(l.2) of the Act, a reasonable expense relating to renovations or alterations to a dwelling of a patient who lacks normal physical development, to enable the patient to be functional within the dwelling will qualify as a medical expense. There are four conditions which have to be met in order for medical expenses to qualify under paragraph 118.2(2)(l.2) of the Act:

1. The expense must be reasonable;

2. The expense must be for renovations or alterations to a dwelling;

3. The individual for whom the renovations are made must be someone who either (a) lacks normal physical development; or (b) has a severe and prolonged mobility impairment; and

4. The expense must have been incurred to either enable the patient to gain access to, or be mobile or functional within the dwelling.

Whether a particular expense is reasonable is a question of fact that must be determined on a case-by-case basis.

In addition, there are two additional requirements for such expenses to be eligible medical expenses. First, the expenses must not be of a type that would typically be expected to increase the value of your dwelling. Second, the expenses must be of a type that would not normally be incurred by a person who has normal physical development or who does not have a severe and prolonged mobility impairment. The copies of your invoices accompanying your letter indicate that the extensive repairs included structural repairs and certain improvements, such as new windows. It appears that some of the repairs and improvements would increase the dwelling's value, and some would not normally be incurred by a person who has normal physical development or who does not have a severe and prolonged mobility impairment.

However, if the renovations or alterations included specific renovations or alterations that would not be made by a person who has normal physical development or who does not have a severe and prolonged mobility impairment, then reasonable expenses relating wholly to such specific renovations or alterations could be claimed provided they are not of a type that would typically be expected to increase the value of your home. The nature of some of the renovation charges included on the invoices, their reasonableness, the likelihood of a person who has normal physical development or who does not have a severe and prolonged mobility impairment, incurring such costs and the impact of the renovations on your dwelling's value, is unclear, based on the information available. We are therefore unable to confirm whether any specific amounts are expenses relating to medical services. Again, we recommend that you submit all relevant facts and documentation to your local Tax Services Office for their views.

We trust that these comments will be of assistance.

Yours truly,

Gwen Moore,
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch